Telecoms operator Airtel Africa, has announced it will sell a minority stake in its mobile money business Airtel Money worth $200 million (Sh21.9 billion) to private equity firm TPG.
The telco has been struggling to cut M-Pesa’s dominance in the Kenyan market including 14 other African markets where the company has mobile money services, reported Business Daily.
TPG will invest in Airtel Money through its investment vehicle The Arise Fund.
In a statement, Raghunath Mandava, CEO of Airtel Africa said, “With today’s announcement we are pleased to welcome The Rise Fund as an investor in our mobile money business and as a partner to help us realise the full potential from the substantial opportunity to bank the unbanked across Africa.”
Airtel says funds raised from the deal with TPG will be used to reduce debt and invest in network and sales infrastructure in its operating markets in Africa.
The investment in Airtel Money will see The Arise Fund making payments in two stages, an initial $150 million and $50 million later, with the deal expected to be completed in four months.
TPG has also been given the option to sell its stake back to Airtel in the future at a maximum price of $400 million (Sh43.9 billion) or double what it is investing now.
Airtel said in a statement, “The transaction is the latest step in the group’s pursuit of strategic asset monetisation and investment opportunities, and it is the aim of Airtel Africa to explore the potential listing of the mobile money business within four years.”
The sale of more shares in the mobile money platform will boost the telco’s war chest and raise competition in the lucrative African mobile financial services business.
Both Airtel, Safaricom and South Africa’s Vodacom Group see mobile money as presenting growth and diversification opportunity and have invested millions to develop new offshoots of their platforms’ core offerings of cash transfers and payments.
“Mobile money continues to be one of the Airtel Africa’s fastest-growing business segments, delivering revenue growth of 30.4 percent in first half of the year [ended September]. It is an increasingly important part of our business and currently accounts for 10.3 percent of our total revenue in constant currency,” the multinational said.
“We aim to drive the uptake of Airtel Money services in all our markets, harnessing the ability of a profitable mobile money business model to enhance financial inclusion in some of the most ‘unbanked’ populations in the world.”
Airtel added that the low uptake of traditional banking services continues to be the main driver of demand for mobile money services.
Airtel Money has struggled in the Kenyan market where it has less than 400,000 active customers against M-Pesa’s 27 million, according to the Communications Authority of Kenya (CA). The service is, however, more successful in other African markets.